Smart Ways to Invest Profits from Your Small Business

Diversification is an important part of any aspiring entrepreneur’s portfolio and is a vital way of building a degree of shock resistance into one’s business structure. Diversification means that if one area of the portfolio fails, it does not necessarily spell the end of the entire venture. While most money from your small business will inevitably be funneled back into the business in order to cover the day-to-day running costs, staff salaries, stock, etc. the profits remaining are yours to do with as you see fit. And, you have a number of options in terms of investing those profits and potentially growing them exponentially.

New Locations

One of the clearest signs of success for a business venture is expansion and expanding brings with it a host of other benefits that are not financial driven. For one thing, expanding your operations increases your visibility and brings you into contact with new demographics. Opening in new locations also presents you with fresh opportunities to create outlets that really stand out and which breathe the life of the local character. Never underestimate the appeal of a place that shows respect and appreciation for the culture and history of its location. That said, one must always be careful about which locations they select and why. This is particularly true if you’re looking to make your first overseas expansion.

As an example, the budget bookshop chain Borders opened up a number of the stores in the United Kingdom that, according to the model which had bought them so much success in the United States, were ideally located and represented fantastic value for the site of large retail outlets. Unfortunately, they discovered too late that the shopping and travelling habits of British and American shoppers were very different and many of Borders prime new locations would remain virtual ghost towns for the duration of their openings. It was observed by a few industry analysis when Borders first begun purchasing land to serve as sites for future stores that the locations they had chosen were unconventional to say the least.

In the US, a country much, much bigger than the United Kingdom, it is not uncommon for trips to the store to constitute a day out (or a significant part of it) and as such, retail parks in the US often aren’t situated within or directly adjacent to urban centers and public transport hubs like they are in the UK. Consumers in the UK proved far less willing to travel out of their way or deviate from their usual routine to visit a single store. It was this underestimation and the failure to properly analyze and profile the market which they intended to expand into that contributed significantly to Borders financial woes. Always do your research before approaching an unfamiliar market.

Invest in Options

Stock options occupy a unique place as being, on the one hand, an essential part of both the United States and the global economy, and on the other a poorly understood financial tool. What is broadly understood about them is that they are by no means guaranteed to bring a return and their risks can be seriously underestimated with tragic consequences for individuals and businesses. There are often parallels drawn between speculation on the stock market and gambling. While this comparison is not entirely fair, after all stock options are selected on their quantifiable merits, they are not a complete game of chance as the term gambling would imply.

It is certainly true that for those going in ‘blind’, speculation is a huge risk and it is not something that should be attempted without consulting with experienced professionals. They will be able to guide you through the range of exotic options available for the investment fund generated by your small business. For example, a so-called ‘binary option’, such as those offered by Stern Options is one with a unique model for paying out. For most investments, final payouts increase in proportion to the growth in value of the underlying asset; the more the underlying value increases, the bigger the payout. Binary options, on the other hand, pay out a fixed lump sum if the investor correctly predicts the value of the asset at a particular time. If the asset closes above or below the stated strike price, then the investor receives their lump sum payout.

Other options for investors include Bermuda, American and European options. American options are options that are free to be exercised at any time following their initial purchase until their expiry date. This contrasts with European options that may only be cashed out at the end of their expiry date. Bermuda options lie somewhere in between; the option can be exercised at a number of opportunities (though not arbitrarily) making it cheaper than the American option while looser on restrictions than the European option.

Streamline Your Operations

Investing money back into your business is an equally precarious task; investing in the wrong area at the expense of a more valuable one can have a disastrous knock-on effect that brings the rest of your organization down with it. To avoid this, you must invest wisely and one of the most surefire ways to achieve this is to focus on streamlining day-to-day operations in order to increase productivity and reduce waste. This is an easy way to make whatever money you do have stretch further, and will in turn put you in a much better position to continue to reinvest profits in crucial development areas. Many entrepreneurs make the mistake of immediately putting their first profits straight back into the company. But, if this is not done right, it is essentially throwing that hard earned cash away.

Starting a business is always a challenging endeavor and the odds will inevitably be stacked against you from the word go. However, by taking a careful and considered approach to the way you invest and reinvest your money, you can maximize both you and your business’s full potential.

Nathan Goodman is a freelance fiction writer and the bestselling author of The Special Agent Jana Baker Spy-Thriller Series. "A terrorist on the loose, a country in panic, and time is running out..." For a free copy visit the author's website.